Several weeks ago, Microsoft CEO Satya Nadella sent an email to the engineering lead overseeing the consumer-facing Copilot, the AI assistant embedded across Microsoft products. In the exchange, a Microsoft manager noted that Google's Gemini chatbot had recently improved its integration with Google Drive, such as better summarizing photo content in folders.
However, Nadella expressed dissatisfaction with Microsoft's comparable technology. The email revealed his critique that Copilot's integration with Gmail and Outlook was "largely non-functional" and "not intelligent enough."
Over recent months, Nadella has increasingly become one of Microsoft's most hands-on product leaders. Last September, he told employees he would delegate some responsibilities to focus more on AI product development and other ambitious technical projects, including data center expansion and advancing AI model capabilities.
As part of this shift, he transferred many commercial functions to Microsoft's sales chief Judson Althoff, who received the new title of "Commercial CEO." For instance, in mid-November, Nadella notably skipped delivering the keynote at Microsoft's flagship Ignite conference for the first time, ceding the stage to Althoff and other executives.
"He wants to minimize distractions and concentrate on what Microsoft truly needs to accomplish in AI," said S. Somasegar, managing director at Madrona Venture Group, former Microsoft executive, and Nadella's friend.
Since stepping back from certain duties, Nadella has immersed himself in operational details. According to two insiders, he actively participates in an internal Teams group of about 100 top Microsoft engineers, frequently calling out perceived shortcomings in AI products by name.
He also leads weekly hour-long meetings, rigorously questioning teams about progress and issuing direct instructions—such as standardizing post-training model practices across groups.
Additionally, Nadella now personally engages in AI talent recruitment, calling candidates directly and approving exceptional compensation packages to lure top researchers from organizations like OpenAI and Google DeepMind.
His involvement has deepened in Microsoft's partnerships with AI developers like Anthropic, which is emerging as a significant cloud services client, mirroring Microsoft's relationship with OpenAI.
Nadella's hands-on management comes as tech CEOs face unprecedented pressure: AI demands massive capital investment amid fierce competition, while revenue growth struggles to match spending. Earlier this month, OpenAI CEO Sam Altman even declared a "code red" to counter competitive threats, including from Google.
Historically, other tech CEOs have returned to technical trenches at critical junctures. In 2012, Meta CEO Mark Zuckerberg pledged to code daily amid stagnant valuation; in 2000, Bill Gates stepped down as Microsoft CEO to become Chief Software Architect, focusing on technical strategy.
Internally, Nadella has sounded similar alarms, warning colleagues that Microsoft stands at a make-or-break inflection point, often citing missed opportunities in search and smartphones during the internet and mobile eras.
Microsoft remains in a relatively strong position. Unlike startups such as OpenAI, it boasts robust cloud computing and software businesses that generate steady cash flow to fund AI ambitions.
Privately, however, Nadella has made clear his top priority: addressing Microsoft's AI technical gaps and positioning the company to capture more AI business.
While Microsoft gained early enterprise AI traction through OpenAI's technology, Nadella and Executive VP Rajesh Jha worry that AI in Office 365 hasn't fulfilled its "promise of work automation." Some major clients rarely use Copilot even when provided free.
For example, UCLA's Anderson School of Management purchased 50 Copilot seats for administrators this past year, but CIO Howard Miller noted, "We made it available, but adoption has been low." He's considering reducing subscriptions next year.
If Office Copilot usage doesn't increase, clients may resist paying, creating openings for rivals like ChatGPT in the enterprise market. Still, some customers are expanding deployments—Nadella cited Barclays and UBS each buying over 100,000 Copilot seats quarterly during July's earnings call.
Yet he pushes to enhance existing Copilot features in Excel and GitHub Copilot, the once-dominant coding assistant now losing share to newcomers like Cursor, Claude Code, and Devin.
Goldman Sachs, an early GitHub Copilot adopter, purchased about 10,000 seats ($2M annually) by early 2024. But according to an insider, the bank has largely shifted to alternatives like Devin, reducing Microsoft tool expenditures.
Other companies report similar transitions, citing little incentive to continue GitHub Copilot subscriptions when superior tools emerge. "GitHub Copilot was great in early 2024 but clearly lagged behind Cursor by early 2025," remarked Tanuja Korlepra, former Microsoft PM and current Bonterra CTO.
While Nadella critiques Copilot's shortcomings internally, he remains its public champion, posting 81 Copilot-related tweets this year—double 2024's count—covering announcements, use cases (like email summarization via voice), and responses to positive user feedback.
The enterprise goal is positioning Copilot as a "digital employee" automating administrative tasks. Short-term, Nadella prioritizes engineering velocity. Employees say he complained in summer about slow rollout of complex Excel features, which later launched weeks behind schedule despite adopting Anthropic's model over OpenAI's.
Meanwhile, more customers question Copilot's value. The mayor of Sioux Falls, South Dakota, noted city employees prefer free ChatGPT and may not renew Copilot. "There are too many free alternatives," he said. "Paid AI must demonstrate exceptional value to justify continued investment."